New rates powers for local authorities

Dec 4 2007 By The Journal

THE ongoing amendments to the business rates system in England (and potentially Wales if the Welsh Assembly chooses to accept them) have been the subject of extensive recent public debate.

After the recommendations of the recent Lyons Inquiry and the increased commitment pledged by the Government to consider using rate revenue to aid economic development and regeneration, Chancellor of the Exchequer Alistair Darling has this month announced that from 2010 onwards, local authorities will be granted powers to enforce business rate supplements on to business ratepayers.

Under the current system, all business rates collected are effectively passed on to central government, which then distributes received funds back to the individual local authorities on a per capita basis. With the introduction of this new legislation, local authorities will once again have some direct ownership of at least part of the revenue generated from business rates.

The local authorities will, however, have to ensure that all spend is justified before enforcing the supplements. Strict rules will mean that the revenue generated will only be available for spending on economic development of the area, for example on schemes such as infrastructure improvements, and all plans and subsequent financial input will need to be clearly outlined and committed to in advance.

Once enforced, ratepayers will have no choice but to pay. However, measures are in place to ensure there are levels of protection for business.

When a supplementary rate is enforced, the national upper limit is 2p in the pound and only those properties with a rateable value of over £50,000 will be required to pay.

While any local improvement schemes should be welcomed, it remains to be seen whether local authorities will act responsibly with these new powers for the benefit of the commercial community.